3rd Quarter Results
2011/1214 February 2012

114 February 2012

Agenda1. LEM at a Glance
2. Business Review
3. Financial Review
4. Outlook

214 February 2012

1. About LEM■ LEM is the global market leader in providing innovative and high quality
solutions for measuring electrical parameters.
■ The current and voltage transducers are used in a broad range of industrial
and automotive markets.
■ LEM is a high growth global company with approximately 1’100 employees.
Production plants are in Beijing (China), Geneva (Switzerland), Machida(Japan) and Copenhagen (Denmark). With regional sales offices close tothe clients locations, LEM provides a seamless service.
■ LEM is listed on the SIX Swiss Exchange since 1986 and has a market capof CHF 439 million per 31.12.2011.

314 February 2012

1. LEM Production & Logistics World-Wide

Production Centers (PDCs)
Adaptation Centers
Sales Offices
Agents / Distributors
4
14 February 2012

1. LEM at a Glance - Businesses
Industry segment
Drives & welding
Motor drives■ Welding■ Miscellaneous■Renewable energies &power suppliesSolar■ Wind■ UPS■ Battery monitoring, processcontrol, energy metering■Automotive segment
Conventional cars■

Lead battery management■ Start/stop application

Green cars (HEV, EV)■

Battery pack management■ Electric motor control

TractionOn-board applications■ Trackside■ Energy monitoring■High precision
Medical scanner■ Test & measurement■

14 February 20125

2. Highlights and Business Review

2. Highlights Q3 of 2011/12
9 months 2011/12(in CHF millions)

9 months 2011/12 to
9 months 2010/11

Q3 to Q2
2011/12

Orders received

127.8-52.3%+5.6*%

Sales

180.5

-17.5%-5.0%

Operational EBIT

26.1

-43.2%-8.5%Net earnings

20.7-24.3%-27.7%* After adjustments for cancellations of CHF 14 million in Q2 of 2011/12■

Economic environment adversely impacts LEM’s businesses; stabilization in Q3■

Continued weakness of the drives & welding business■Continued weakness of the renewable energies business■

Customers’ inventory corrections ending■

Pick-up in automotive businesses■

Restructuring measures fully achieved savings targets■

Focus on cost and capacity management

14 February 201272. Net Sales
Sales

In CHF millions(in CHFmillion)

300275250Growth
9M to 9M

GrowthQ3 to Q2

Total Sales

180.5-17.5%-5.0%

Industry

161.0-20.4%-7.0%

Automotive

19.5

16.9%

11.0%

225200175150

■

125

■

100■

75

Limited visibility of industry businesses
Good performance of automotivebusinesses
Constant currencies growth for 9 monthof 2011/12 of -7.1%

50
250
2007/08

14 February 20122008/09

2009/102010/119 months
2011/128

2. Quarterly View
In CHF millions

Book‐to‐bill ratio

100

1.4

90
1.280

75.0
66.8

70

1

■ Customers’ inventory
corrections ending

57.9
55.048.35077.4
67.7

58.4

604077.0■ Uncertainty in worldwide
economy

43.2
35.6

300.8

■ Stabilization of bookings

0.6■ Cancellation of orders receivedof CHF 10.5 million in Q1 andCHF 14.0 million in Q2 of
2011/12

0.4

200.2
1000

■ Q3 book-to-bill ratio 0.86

Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
09/10 09/10 09/10 09/10 10/11 10/11 10/11 10/11 11/12 11/12 11/12

Orders received
14 February 2012

Sales

Book-to-bill ratio

92. Cost and Capacity Management UpdateEconomic weakness impacts mainly industry businesses while automotive
businesses continue to growOn 22 September LEM 2011 announced a step-up of cost reduction
measures Reduction of worldwide headcount to below 1’100 employees
 Restructuring cost of CHF 0.7 million; quarterly savings ofCHF 1.1 million fully applicable from Q4 2011/12
All savings targets have been fully achieved
 Restructuring cost as planned, recorded in Q2 of 2011/12
 Operating expenses declined in Q3 vs. Q2 of 2011/12 by 8.6%
 Global headcount reduced to 1’100 employeesContinued investment in LEM’s future
 R&D spend increases by 5.3% in Q3 vs. Q2 of 2011/12

LEM expects to remain profitable while keeping its ability to benefit from arebound1014 February 2012

2. Industry Segment: Regional Markets
Sales(in CHFmillion)

Growth9M to 9M

GrowthQ3 to Q2

Europe80.8-25.4%-16.4%

N. America

20.5

-3.6%

16.5%

Asia

55.6

-19.5%

-2.3%

ROW

4.1

15.1%

14.5%

Total

161.0

-20.4%-7.0%

EuropeNorth America
3%

Asia
Rest of the World

50%
34%

■ Europe remains the most importantmarket13%■ North America shows first signs ofrecovery
1114 February 2012

2. Industry Segment: Business Development
In CHF millions

Op. EBIT in % of sales
25300

260
20220

180

15140
10100Businesses and Applications in Q3
Drives & welding
Weak demand and continued inventory
corrections of customers in Europe andAsia
Renewable energies & power supplies
Weak business due to reduction ofinventories in our customers’ supply chain
Increase of activities in US and Asian solar
markets

60
520

‐20

07/08

14 February 2012

08/09

09/10

2010/119 months
2011/120Traction
Delays of major projects in China
High precision
Stable sales

122. Automotive Segment: Regional Markets
Sales(in CHFmillion)

Growth9M to 9M

GrowthQ3 to Q2

Europe1.8-14.6%

16.2%

N. America

10.3

17.0%

13.3%

Asia andROW

7.5

27.9%

7.0%

Total

19.5

16.9%

11.0%

EuropeNorth America
Asia and Rest of World

9%

38%

■ Growth with existing and new customers

53%■ North America the largest market, but
Asia catching up fast
■ Start of production of new platforms
1314 February 2012

2. Automotive Segment: Business Development
In CHF millions

Op. EBIT in % of sales

2525202015151010550007/08

08/0909/10

2010/119 months
2011/12‐5-5‐10-10‐15-15

14 February 2012

Businesses and Applications in Q3
Conventional cars
Won new contracts with new start/stop
application
Green cars (HEV, EV)
Positive trend due to market growth and aseries of new car launches
Majority of green cars projects planned orin production globally are equipped with
LEM transducers

14

2. Business Development - ChinaSales• Market share over 50%• Sales impacted by slowing activity
specially in solar, wind and traction
In CHF millions

Production• LEM China expands its #1 position aslargest manufacturing site of the Group• “Made by LEM” quality
In CHF millions
12055
100
4580
3560
25401520
50‐507/08

14 February 2012

08/09

09/10

10/11

9 months
2011/12

07/08

08/09

09/10

10/11

9 months
2011/1215

3. Financial Review

3. Results by Quarter
In CHF millions% of sales
25%

100
90

77.0

80

75.0

58.4

60

43.2

20%
67.7

66.8

70

77.4

57.9

48.3

55.0 15%■ Stabilization of orders and sales on lowlevel■ Operational EBIT margin of 12.6% in Q3of 2011/12 maintained despite lowersales

504035.6

10%■ Cost saving targets achieved

305%

20
1000%
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
09/10 09/10 09/10 09/10 10/11 10/11 10/11 10/11 11/12 11/12 11/12
Orders received

Sales

Op. ROSNet Profit in % of sales

1714 February 2012

3. Income Statement
In CHF thousands

9 months
2010/119 months
2011/12

ChangeQ2
2011/12Q3
2011/12

ChangeSales

218’824

180’491-17.5%

57’85254’980-5.0%

Gross margin

43.2%

42.0%

-1.2%pt

42.6%41.0%-1.6%pt

Operating Cost

-48’650-49’699

2.2%-17’029-15’569-8.6%

Operational EBIT

45’98526’140-43.2%

7’594

6’946

-8.5%

Additional SOP
income / costs-4’958

636

N/A

740

17N/A

EBIT

41’027

26’777-34.7%

8’334

6’964

-16.4%

Financial expense(net)-4’268-872-79.6%

1’177

290

N/A

Income tax-9’441-5’226-44.6%-1’696-1’603-5.5%

Net profit

27’318

20’678-24.3%

7’816

5’651

-27.7%

14 February 2012183. Gross Margin Development

In CHF millionsGM % of sales
50%

130120Gross margin

9M
2010/119M
2011/12Q2
2011/12Q3
2011/12

94.6

75.8

24.6

22.5

43.2%

42.0%

42.6%

41.0%

in CHF million

11048%

100

Gross margin
in % of sales

9080

46%

70
60
44%

50

■ Q3 of 2011/12 gross margin continues to be
adversely impacted by:■ Foreign exchange rates

4030

42%

20
1040%

007/0808/09

14 February 201209/10

2010/119 months
2011/12■ Competitive price pressure■ Lower volumes / leverage on fixedmanufacturing cost19

3. Operating Expenses
In CHF millions% of sales50%90

Operatingexpenses

8040%

70

9M
2011/12Q2
2011/12Q3
2011/12

48.7

49.7

17.0

15.6

22.2%

27.5%

29.4%

28.3%

in CHF million

Operatingexpenses

60

9M
2010/1130%

in % of sales

20%■ Q2 of 2011/12 includes restructuring cost of CHF
0.7 million

5040302010%■ Excluding restructuring cost operating expenses
in Q2 of 2011/12 were already 5% lower than in
Q1 of 2011/1210■ All savings targets in Q3 of 2011/12 achieved
00%
07/08

08/09

14 February 201209/10

2010/119 months
2011/1220

3. R&D Expenses
CHF millions% of sales
12%

15

R&D
expenses

129%

9M
2011/12Q2
2011/12Q3
2011/12

9.6

10.4

3.2

3.4

4.4%

5.7%

5.6%

6.2%

in CHF million

R&D
expenses
99M
2010/11in % of sales
6%■ R&D exempted from restructuring exercise
63%■ Increased R&D efforts as an investment into thefuture300%
2007/08

2008/09

14 February 20122009/102010/119 months
2011/1221

3. Operational EBIT
In CHF millions

Op EBIT % of sales

7024%

60

22%

OperationalEBIT

9M
2010/119M
2011/12Q2
2011/12Q3
2011/12

46.0

26.1

7.6

6.9

21.0%

14.5%

13.1%

12.6%

in CHF million

OperationalEBIT

5020%

4018%

3016%

■ Excluding additional SOP cost/income

2014%■ Exceptionally good profitability in 2010/11

1012%■ Lower sales impact operational EBIT

0in % of sales

10%
07/08

08/09

14 February 201209/10

2010/11 9 months
2011/1222

3. Legacy SOP Programs Expire per 31.03.2012
■

■
■
■

LEM’s legacy stock option plans (SOP) are cash settled; their cost isdriven by the share price development (31.3.2011: CHF 570;
30.12.2011: CHF 385)
Valuation according to IFRS; time value of option decreases over time
Significant reduction of volatility in 2011/12; ended per 31.03.2012
Currently LEM has no further option based compensation programs
31.03.2008

31.03.2009

31.03.2010

31.03.2011

30.09.2011

31.12.2011

31.03.2012

70’45766’20740’794

4’952

3’876

3’876

0max.

Closure ofSOP 5# outstandingoptions

SOP 6

23
14 February 2012

3. Financial Expense

Exchange effect*

9M
2010/119M
2011/12Q2
2011/12Q3
2011/12-3’910

-676

1’274

359-359-195-97-69-4’268-872

1’177290

Other financial expense +incomeTotal

 Q2 of 2011/12 exchange effect mainly driven by EUR and USD appreciation
following the SNB intervention
 Q3 of 2011/12 exchange effect driven by further appreciation of USD
 Foreign exchange hedging policy In general: 50% of net exposure on a rolling 3-9 month basis
 Euro: 100% of net exposure 12 months forward*The line “exchange effect” in the financial result is mainly due to currency volatility during the time between booking andsettling a receivable/payable. Over and above this line, foreign exchange rates impact every P&L line through the rate at
which each transaction is booked and at which it is consolidated into CHF.
14 February 201224

3. Income Taxes
In CHF thousands

9M
2010/119M
2011/12Q2
2011/12Q3
2011/12EBT

36’75925’905

9’511

7’254

Income taxes-9’441-5’226-1’696-1’603

Effective tax rate

25.7%

20.2%

17.8%

22.1%

In %

9M
2010/119M
2011/12Q2
2011/12Q3
2011/12

Expected income tax rate

22.8%

20.0%

19.1%

20.4%

Expected withholding tax rate

2.9%

2.4%

4.7%

1.7%

Expected tax rate

25.7%

22.4%

23.8%

22.1%

-2.2%

-6.0%

20.2%

17.8%

Adjustments in respect ofprevious periods’ income tax
Effective tax rate

25.7%

22.1%

 Reduction/increase of the expected tax rate with increasing/decreasing volumes in low
tax entities
14 February 201225

3. Net Profit
In CHF millions% of sales

Net profit
in CHF million

16%

45

Net profit
in % of sales

40

9M
2010/119M
2011/12Q2
2011/12Q3
2011/12

27.3

20.7

7.8

5.7

12.5%

11.5%

13.5%

10.3%

14%
9M 2010/11

3512%

3010%‐5.0‐4.346.0

‐9.4
27.3

258%
Operational EBIT SOP inc./cost

206%

FinancialexpenseIncome tax

15Net profit
9M 2011/124%

100.6
‐0.9

5007/08

08/09

14 February 201209/10

2010/11 9 months
2011/122%

26.10%

Operational EBIT

‐5.2
20.7
SOP inc./cost

FinancialexpenseIncome tax

Net profit
26

3. Financial Highlights in Q3 of 2011/12 - SummaryStabilization of bookings and salesProfitability
 Gross margin of 41.0%
 Cost reduction plan on track – fully achieved savings targets
 Operational EBIT margin of 12.6%
 Tax rate on low 20%-level Net profit of CHF 5.7 million for the quarter, CHF 20.7 million for
9 months

Increased the investment in R&D

27
14 February 2012

4. Outlook

4. Market Factors and Strategy■ We firmly believe in our strategic
direction and the 4 drivers for ourbusiness remain unchanged■ We will continue to capitalize on
the drivers of LEM’s markets
through pure play components company
 diversification across geographiesand markets

29
14 February 2012

4. Outlook
For Q4 of 2011/12 we expect a stabilization, but it is too early to forecast
a trend reversal:
 Slight slow-down of sales in the Industry segment
 Continue the growth in the Automotive segment
For the financial year 2011/12
 Sales forecasted to be CHF 225 to 235 million
 Operational EBIT expected to be about CHF 31 million

30
14 February 2012

5. Financial Calendar and Contact Details
Financial calendar
6 June 201228 June 2012
4 July 2012
9 July 2012

Year-end 2011/12 results and media and analyst conference
Ordinary shareholder's meeting for the year 2011/12
Dividend ex-date
Dividend payment date

For further information
Julius Renk, CFO
Tel.: +41 22 706 12 50
E-mail: investor@lem.com

3114 February 2012